T-Mobile smartphone

T-Mobile(DTEGF) customers will say goodbye to the $200 smartphone upgrade this year, meaning the purchase price of a smartphone will jump by hundreds of dollars.

Instead of getting a reduced-price iPhone or other smartphone when they sign a two-year contract, company officials say customers will still end up paying less in annual phone costs.

It works like this: when a customer pays full price for their phone, T-Mobile will offer a so-called value plan, such as one with unlimited minutes, texting and data for $69.99 a month. That same plan currently costs $89.99 a month with a subsidized phone and two-year contract.

Last month, T-Mobile announced that it would get rid of its smartphone subsidies altogether in 2013. The phone costs will be offset by monthly financing options and lower rates than other providers, adding that the plan would also allow customers to upgrade their phones at any time.